We're not too proud to say we made gigantic mistakes when we hired property managers for some of our properties. Our biggest errors happened before we even bought the properties, but we continued to make them until one day Dave was reading his name in the paper, calling him "an absentee landlord of a local crack house", and we were making the discovery that our other property manager was robbing rent money from us.
When my husband and I moved into a triplex we own in Toronto, we dismissed our property manager and started collecting rent from the other tenants directly. Imagine our surprise when the checks were for $100 more than we expected! The property manager had lied to us about the amount of rent we were getting, and he had been pocketing the difference. We figure he stole at least $2,000 from us in that one year. The worst part is that his scam was easily preventable.
Make sure this doesn't happen to you by asking for copies of every lease agreement. And ask for photocopies of the checks. If the tenant pays by cash or some other method (we use a lot of e-mail money transfers with our tenants), get a printout of the transfer or get copies of the receipts given to the tenants for cash payments. It is good to have this documentation for tax purposes and it will help prevent your property manager from taking an extra cut off the top.
Other things you can do to protect yourself from a bad property manager include:
Before you buy a property, make sure you are able to hire a good property management firm. There are some properties that good property managers will not manage. And if they won't manage them, there's a good chance they are more work then they are worth.
Research your potential property manager obsessively. When you've found a firm that you think you'd like to hire, get references and find out what other properties they manage. Drive by those properties and see how well they are maintained. Take a walk around and hope to bump into a tenant. See if the tenant is happy with the property management company. And definitely call a few of the owners of these properties the company manages and find out if they would recommend the company.
If there is one unit that always seems to be vacant, check on it. Visit the unit or have someone else visit for you. Confirm that it is vacant. If someone is living there, you want to find out why you aren't getting rent for it. And if it is really vacant, you need to see it yourself to find out why and fix the problem.
If you are being charged for snow removal, check the weather history and make sure it actually snowed that day. If you are being charged for repairs, get receipts or photographs of the repairs.
We've learned a healthy dose of paranoia goes a long ways. So trust your instincts, but check them too. A few extra phone calls and a few extra steps here and there can save you thousands of dollars a year.
[expert=Julie_A_Broad]
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